Sobeys' owner sells theatres

An Empire theatre sign is seen in Dartmouth, N.S. on Thursday. Empire Company Limited is getting out of the movie-theatre business in order to focus on Sobeys, their national grocery chain.

STELLARTON, N.S. -- Empire Company Ltd. (TSX:EMP.A) is getting out of the movie-theatre business in order to focus on Sobeys, the national grocery chain that accounts for most of the Nova Scotia-based company's revenue.

Canada's largest cinema company, Cineplex Inc. (TSX:CGX), will pay $200 million cash to acquire 26 of the theatres -- all 24 of the Empire theatres in Atlantic Canada and two in Ontario.

Cineplex said the deal is strategically important since it gives the Toronto-based company a presence in Canada's four most eastern provinces.

The sale will also give Cineplex 78 per cent of the movie-theatre business in Canada.

The theatres Cineplex is acquiring generated $113 million in total revenue in 2012, RBC analyst Haran Posner said in a note.

Another 20 Empire theatres in Ontario and Western Canada will be sold to Landmark Cinemas for up to $55 million, including the Grant Park Theatre in Winnipeg as well as theatres in Brandon and Winkler.

Landmark will pay $31 million cash, plus equity in a new entity worth $19 million, as well as an earn-out right estimated to be worth $5 million. Landmark will be able to buy the equity from Empire for $19 million until Dec. 31.

After the sales, Empire said it will have four theatres left over. Two of those theatres -- located in Victoria, B.C. and New Glasgow, N.S. -- will be sold as real estate.

Empire said it will decide what to do with the other two theatres, both located in Ontario, when their leases expire in August and December. The company says it will likely sell those theatres as well, or close them.

"We're not going to be operating four theatres in three different provinces," said Empire spokesman Andrew Walker.

The company will use the proceeds to pay down debt, Walker said.

Empire also announced Thursday it had $98.6 million or $1.45 per share of adjusted earnings in the fourth quarter -- up $9 million from a year earlier and eight cents per share above the consensus estimate.

The company's net income for the quarter ended May 4, before adjustments, was $107.4 million or $1.58 per share -- up from $92.1 million or $1.35 per share a year earlier.

After the quarter ended, Empire announced it would pay $5.8 billion to acquire Safeway's Canadian grocery business -- adding about 213 grocery stores in Western Canada as well as in-store pharmacies, gas stations, liquor stores, distribution centres and 12 manufacturing plants.

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